Essentials of International Debt Recovery
The essentials of International Debt Recovery
Whatever business you are in, it is a fact of life that some customers won’t pay their debts.
Some even ignore reminders flat-out and fail to respond to reasonable requests or to suggest repayment proposals.
This can be a tricky situation, and it can be particularly daunting if your clients are based overseas.
Every country has different laws on debt recovery, and some of their legal processes can be highly puzzling by their complexity. So where to start?
Establish the Type of Debt
The starting point for any international debt recovery process is to establish the type of debt.
Are you looking at a bad debt or a late payment?
If the customer is not contesting the amount owed, it is likely that they are experiencing financial or cashflow issues of their own, and this may mean other suppliers are not being paid either. In this case, it could be important to get to the front of the queue so that when they are in a position to pay, you are first in line.
In the case of a late payment, it is important to be direct and push for the debt to be repaid.
Allow reasonable time for the payment to come through, but no more than 30 days past due, but after that, don’t waste time repeating your credit control processes.
And don’t be reluctant to ask direct questions. Ask when you will be paid, push for an explanation and follow up regularly. If payment still isn’t forthcoming, then you may be looking at a potential bad debt, in which case, it is important to seek professional help.
Debt Collector or Solicitor?
When it comes to international debt collection, you may consider engaging a legal firm. The problem with using a lawyer or a solicitor is the cost involved.
For a reliable legal professional in the UK, you could face fees of up to £400 per hour if your client raises even a small issue.
Some companies engage a solicitor who will send what is known as a ‘letter before action’ for a small fee, but these letters have a notoriously low success rate, especially if they are not country specific.
And even if you secure a court judgement in your favour in the UK, you will often have to face the costs of registering and enforcing that judgement in another country, which is never straight forward.
That’s why many companies turn to specialist cross-border debt collection agencies when seeking to recover an international debt.
High-quality debt collectors will operate on a no win no fee system, which means you won’t be paying out before the debt is recovered. Unlike most solicitors or lawyers, debt collection agencies are specialists in their field, which is particularly important when you are attempting to obtain payment from an overseas client.
Before you engage a debt collection agency, check out their credentials. Never use a debt collection agency that is not a member of the Credit Services Association, and always ensure that you see the agency’s full terms and conditions, pricelist and that you understand what their commission rate covers – i.e. that it includes the commission of their local debt collection partner in the country concerned – before entering a formal agreement with them. It is also a good idea to do some research about the agency’s success rate, reputation in the industry and experience at recovering international debt.
Get In Touch Today
Our international debt recovery service is focused on helping you to recover your international debts. We have the advice and experience you need to get your money back from an overseas client with minimum hassle, so get in touch today. We also offer Letter Before Action available for purchase online. Credit Limits International is also a member of the TCM Group.